Friday, July 22, 2011

22 July (Fri), Evening summary

Among the standouts in today’s trade was a sharp contrast in the performances of the DJIA and the NASDAQ; the index of blue chips took a haircut of 0.34 percent, while its tech-heavy cousin advanced 0.86 percent. (The S&P 500 was virtually unchanged at +0.09 percent.)

The modest 24-point pop of the NASDAQ masks the important technical level reached in today’s trade, but a 4-hour bars chart of E-mini NASDAQ 100 futures (/NQ) bears all. Today’s price action catapulted the contract into highly significant price channel resistance. Yet the resistance is in stark danger of failing, as today marks its second test in short succession (the last was on 7/7). The shallow pull-back in the interim did not plumb down to the depths of the lower price channel, adding further evidence to the thesis of fragile resistance. An advance beyond 2440 or 2450 in next week’s trade would render the near-term outlook as strongly bullish.

/NQ, 4-hour bars:

Shifting perspective to the daily chart of /NQ, the viewer can easily attribute significance to the upper trendline of February to July, which is nothing but the upper line of the price channel mentioned above.

The broadening of the YTD price oscillations hint at an unstable topping formation which might portend a forthcoming bear market, although such an interpretation would be more plausible with more markedly diverging trendlines. In any event, an upside breakout -- so long as it is not a bear trap -- would naturally reject the hypothesis of there being any topping formation whatsoever.

/NQ, daily bars:

Changing gears, there appeared to be an opportunity during today’s market action for a long punt of Dow Jones Industrial Average Spdr ETF (DIA). A 3-minute bars chart reveals a well-formed channel of the week’s price action, and weakness during the 9:00am (CST) hour seemed to be headed for support at ~$126.00. Had selling pressure brought DIA to that level, it would have represented a relatively low-risk long entry point. Yet the trade did not appear; bulls emphatically appeared $0.25 too soon.

DIA, 3-minute bars:

As this trading day blended into the evening, the nation’s eyes turned to Washington, where the debt ceiling drama continued as House Speaker Boehner walked out of negotiations with President Obama. The President promptly convened a news conference during which he described in no uncertain terms the fragility of the negotiations and the dearth of time remaining. The (24-5) futures market was already closed for the weekend. In the alternative, how negative might the reaction have been?

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